Paradise Co., South Korea’s largest operator of foreigner-only casinos, is increasing capacity to cater for a boom in Chinese visitors, even as China cracks down on foreign casinos marketing to its citizens.
Paradise will expand floor space at three of its five casinos including doubling the size of gaming areas at its casino on Jeju Island, as Chinese gamblers who comprise more than two-thirds of its visitors pack its halls, Vice Chairman Lee Hyuk-Byung said in an interview with Bloomberg.
China announced on 6th February 6 would stop foreign casinos from luring its citizens to gamble overseas including through offices set up in the country, the latest in a slew of policies linked to an anti-corruption campaign that has hit gambling revenues in Macau. Seoul-based Paradise doesn’t market directly to gamblers in China as that is illegal, and it mainly relies on word of mouth, Mr Lee said on 5th February, prior to China’s announcement.
There isn’t enough information about the latest policy and Paradise hasn’t seen any impact on its operations, said Hyejeong Shim, an investor relations official at the company after the announcement.
Casino operators such as Australia’s Echo Entertainment Group Ltd. and Nagacorp Ltd. are trying to woo Chinese gamblers as the anti-graft campaign and stricter visa rules to Macau drove them to seek alternative gaming markets. There has been a surge in the number of visitors from China to South Korea over the past two years , Mr Lee said.
“If you visit our casinos, it isn’t full on the weekdays, but on the weekends from Friday afternoon to Sundays, it’s fully packed and very crowded,” Mr Lee said. “This means we cannot provide all the gaming needs of our visitors. By expanding, we can.”
While sentiment for Paradise and Grand Korea Leisure will probably suffer in the short term, China’s clampdown on casino marketing within its borders is unlikely to seriously impact the foreign markets targeting Chinese gamblers, Ilwoo Yang, an analyst at Samsung Securities Co., wrote in a note.
“Korean casinos may actually benefit, as their success at attracting Chinese punters appears to be due to Korea’s proximity to China, not marketing capabilities,” he wrote.
Paradise will spend $26 million on the expansion, adding 26 gambling tables at its casinos, mostly for baccarat, bringing its total table count to 252, according to the company.
The expansion by the South Korean operator comes as Macau’s casino revenue slumped for an eighth straight month in January, for the longest losing streak on record. Paradise in 2014 posted its first profit decline in three years, according to data compiled by Bloomberg.
Chinese tourists to Korea are increasing as Korean pop culture gains popularity and travel restrictions between the two countries ease, Mr Lee said. Mainland Chinese gamblers
Some 67% of the company’s high rollers last year were mainland Chinese, up from 46% in 2010. Meanwhile, Chinese accounted for 77% of mass gamblers last year, rising from 50% in 2010.
About 6.1 million mainland Chinese travelers went to South Korea last year, a year-on-year increase of 42%.
Paradise is Korea’s largest foreigners-only casino operator with almost 50% market share, while Grand Korea Leisure, a state-run casino operator, ranked second with a 42% share.
Kangwon Land Inc., which operates South Korea’s only casino that allows locals, is the country’s largest operator overall by sales, followed by Paradise, according to data compiled by Bloomberg.
Paradise plans to focus on bringing in mass market gamblers, especially with its 1.3 trillion won ($1.2 billion) Paradise City integrated resort, currently under development in partnership with Japan’s Sega Sammy Holdings. The resort will feature Korean-style spas and restaurants and K-pop entertainment.
